Maine’s overdue taxes top $251M

AUGUSTA, Maine — While the state is collecting more overdue taxes, the actual amount of uncollected tax money is growing, and lawmakers are considering ways of getting the money that’s owed.

As of Jan. 31, uncollected taxes owed to Maine totaled more than $251 million, raising concern among lawmakers on both the Appropriations and Taxation Committees.

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“We are told that of these uncollected taxes, a third of that money is more easily gotten, another third you have to work for, and the last third, maybe you can’t get it,” said Sen. Bill Diamond, D-Windham, co-chair of the Appropriations Committee. “When you look at $250 million, even two-thirds of that, I think, justifies a well-laid plan for the Legislature to have to try to get that money that is owed.”

Sen. Richard Rosen, R-Bucksport, a member of the panel agrees. He said it is unfair to Mainers who pay their taxes on time to have thousands go without paying their share of the tax burden.

“The information seems to indicate it is a chronic problem,” he said. “I think we do have to understand why is it that the mechanisms in place fail to collect what are due in many of these categories.”

The personal income tax accounts for both the largest dollar amount and the most cases. According to the most recent data available, as of Jan. 31 uncollected income taxes totaled $153.7 million owed by 57,144 taxpayers.

Sales taxes collected but not submitted by businesses to the state total just under $44 million owed by 20,000 businesses. Corporate income taxes owed by 994 corporations total $20.4 million.

There also is a problem with businesses not paying the income tax they have withheld from their employees. Maine Revenue Services lists 10,361 employers that owe just over $16 million.

In a separate category that lumps together 22 tax types — from the gas tax to the insurance premium tax and the estate tax — 2,130 “other” cases account for just over $17 million in uncollected taxes.

“We have collection efforts in place and we have realized additional revenue from the steps we have taken to improve collections,” said Finance Commissioner Ryan Low.

Errol Dearborn, director of the Compliance Division of Maine Revenue Services, said that for the fiscal year that ended last June 30, the agency collected just under $70 million in overdue taxes. That is up from $49 million three years ago.

The state uses a wide array of tactics to collect what is owed, Dearborn said, including matching databases with the Internal Revenue Service and hiring bill collection agencies that are paid a commission to collect.

He said MRS works with a taxpayer to set up a payment plan before sending the case to a collector.

There also are a relatively few criminal cases every year but most tax cases are worked by state agents trained in that area of taxation.

“It takes time to train an agent and have them bringing in what they can when they are experienced,” MRS acting Executive Director Jerome Gerard told lawmakers earlier this month. “We will see additional revenue from any new agents we add, and they will more than pay for themselves.”

That is an assertion that members of the Taxation Committee want proven. Sen. Richard Nass, R-Acton, is the GOP senator on the panel and has served on the Appropriations Committee in past sessions.

“We have been putting more money into additional agents for years with the idea that they will collect far more than they cost,” he said. “It appears we are losing ground — we are not keeping up.”

Two years ago the uncollected taxes were $219 million with that increasing to $251 million at the end of January. Nass said the panel has asked MRS for a detailed analysis going back several years that traces the additional staff added and compares that with the additional tax dollars that can be attributed to the new staff.

Sen. Joe Perry, D-Bangor, the co-chairman of the committee, said the state has a balancing act in the current economy. The state does not want to force a company to close its doors and put people out of work to pay off a tax debt, he said, and MRS needs to work with taxpayers.

“We have to try to collect the money that is owed,” he said, “but we have to be careful about the tactics that are used. People are hurting in this state; people have lost their jobs and lost their homes to foreclosure, and I think it will get more difficult to collect back taxes as this recession continues.”

Diamond said that while the state must take into account a taxpayer’s situation, he wants fairness in the tax system for everybody.

“If somebody is not paying their taxes, then the rest of us that are [paying] have to pay more,” he said. “That is not fair and we need to address it.”